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Archive | August, 2012

While there’s some evidence that offshore manufacturing is slowing and, in some cases, reversing to onshoring, in my opinion, the practice of offshoring U.S. manufacturing and service jobs will continue in the coming years.

Growing up and working in the “Motor City” gave me an early and first-hand perspective on the effects of offshoring manufacturing jobs. I fondly remember the time that GM was not only the biggest car manufacturer but also the biggest company in the world. If you don’t already know the answer to “Who’s the biggest company now?” look it up. It isn’t a manufacturing company.

My first job out of college was at a large Detroit-area automotive-parts factory, where I worked as an engineer. I used to spend a lot of time with the maintenance crew trying to figure out why so many parts were out of spec and defective—maintenance actually recognized these types of problems early on.

Our maintenance department did its best to keep things operational with broken-down auction-purchased equipment, few resources and a run-to-failure management attitude. Ultimately, poor quality output and stalled customer assembly lines resulted in business failure and the eventual offshoring of the production. Over one thousand jobs were lost. That happened nearly 30 years ago, in the early 1980s—offshoring continues today and seems on track to even increase in the future.

At my own company, CyberMetrics, we work with many automotive, electronics, pharmaceutical and biotech manufacturers, supplying and supporting them with our FaciliWorks® CMMS software products. Nearly all of our larger and many of our mid-sized customers have offshore or at the least, near-shore facilities (and those counts are rising). Though operations are offshore, our customers still want to make sure manufacturing equipment and facilities are properly maintained, regulatory compliance is met and MRO inventories are adequately stocked. Fortunately, our cloud-based CMMS software makes both local and offshore deployment fairly quick and easy for our customers.

Political parties will continue to debate the question of offshoring for votes and mindshare—it evokes emotion. Yes, there will be some minor onshoring of a few jobs and the debate will fade, only to resurface once again, of course, during the next campaign.

Like it or not, offshoring is here to stay and, most likely, will only grow with time. Why? We always want the lowest price—always.MT

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Today’s global economy allows companies to design, source, manufacture and sell from an intricate web of locations based on a variety of factors, including customer sites, talent base, supply quality and availability and logistics costs. Fluke is a global corporation serving a global customer base with a global footprint. We operate every one of our facilities worldwide on the same lean manufacturing principles and to the same high standards of quality.

As a developed economy, the United States and its manufacturing base have been faced with the challenge of doing more with less for some time: operating older factories at higher levels of output, with increasing amounts of automation that, in turn, requires continuous training for operations and maintenance teams who carry ever-broadening job descriptions. The U.S. benefits from a smart, lean, experienced talent pool. This has certainly helped it compete in a dynamic global marketplace—and has been an important variable in many companies’ decisions to bring manufacturing back to this country. Maintaining that competitive edge in the future will require building and replenishing this talent base.

STEM (Science, Technology, Engineering, Math) education, experience and mentoring is critically important for preparing the future generation of technicians, electricians and engineers. Rising to this challenge will require the U.S. to bolster its STEM education in K-12, attract talented youth into targeted vocational training, as well into four-year and advanced degree programs, and leverage on-the-job training/mentorship.

Fluke supports a variety of different workforce training initiatives—including K-12, post-secondary, trades and continuing education. The manufacturing sector needs a larger supply of people trained to think on their feet, to troubleshoot and diagnose and to communicate across teams. Starting with the essentials of math and science on up to secondary programs that couple hands-on training with in-class instruction and then to employer-sponsored training programs, education is at the root of America’s future success as a continued global manufacturing powerhouse.MT

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As a global company, Gates Corporation recognizes the importance of manufacturing in local economies for local consumption, and is committed to meeting market demand—wherever it may be. Our manufacturing in the U.S. has been strong for our entire 101 years, and with over 50 years in both Canada and Mexico, our North American manufacturing continues to be the main source for our North American customer base.

Because many of our customers are expanding their stateside operations, we need to be proactive and prepared for the anticipated demand growth that will certainly impact our operations. I see reshoring as an opportunity for Gates and other manufacturers with operations in the U.S. to evaluate current processes and technologies and invest in increased automation, productivity improvements and training and education.

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The influx of new production means that now—more than ever—it’s crucial for manufacturers to adopt Lean Manufacturing principles and put robust sales and operation planning processes (S&OP) in place to tie commercial demand to delivery expectations. The Commercial organization must clearly communicate market demand to Operations, creating a downstream process for assessing the raw materials and workforce needed to successfully meet and manage any impending increases.

At Gates, we continue to invest in product process and productivity improvements. We have built a Continuous Improvement culture that incentivizes and rewards our associates for identifying opportunities to create efficiencies and reduce overall costs. Beyond this, we document and share key best-practice processes and methodologies across our global teams and facilities.

Reshoring notwithstanding, knowledge sharing and communication are imperative. Training initiatives need to be viewed as critical as any HSE investment. As the experienced, technical, skilled workforce dwindles, we need to ensure that retiring employees share their knowledge with the younger, inexperienced generations. Now is the time to take education in-house, and reinvest in internships, apprenticeships and on-the-job training programs.

Gates provides Leadership, Education and Development (LEAD) training and a Supervisor Training Excellence Program (STEP) to create leaders who drive our culture and are equipped to educate and inspire our employees. We also provide ongoing Lean Manufacturing training to ensure employees are properly applying our processes. In fact, some of our customers have asked us to assist them in implementing and optimizing their own Lean Manufacturing processes.

Ultimately, it’s cross-team communication and cross-company collaboration that will help the U.S. manufacturing industry improve its infrastructure and ready its workforce for a period of sustained growth.MT

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GE CEO & Chairman Jeff Immelt often discusses how global growth and demand from overseas customers represents a tremendous opportunity for U.S. manufacturing and innovation. (In fact, GE has already discussed its plans for creating approximately 15,000 new U.S. jobs since 2009.) I strongly echo that message.

The largest exporter in the state of Nevada, GE’s Bently Nevada line has been synonymous with machinery protection and asset condition monitoring for more than 50 years. We recognize that behind every great product is a team of great people—and are extremely proud that a vast majority (more than 90%) of our products are still locally manufactured in Minden, NV, by the most experienced team in the industry.

More than 800 strong, our U.S. team remains committed to investing in the technology solutions that have made GE’s Bently Nevada the resilient American company that it is today—namely, our continuous online condition-monitoring systems that customers know and trust to protect their most valuable and critical plant assets.

But like any competitive industry leader, GE continuously strives to uncover new sources of innovation—both here in the United States and around the world—to create smart, differentiated technology solutions that help our customers remain at the forefront of their industries. That commitment to our customers was demonstrated by the 2011 acquisition of New Zealand-based Commtest Instruments, a company recognized globally for its leadership and innovation in portable vibration analysis and monitoring instruments. This strategic acquisition has enabled us to provide customers across the oil, gas and power-generation industries with an enhanced suite of integrated condition monitoring solutions that take into account the health of the entire plant.

And it doesn’t stop there. In addition to launching a new series of innovative, portable solutions, we continue to make forward-looking technology investments. We have plans to unveil more distributed systems and software in the near future, along with a number of exciting new technologies that align with our vision to unite all of our offerings into a comprehensive, plant-wide condition monitoring experience for our customers.

Building on our strong American heritage, we look forward to both the challenges and opportunities ahead in leading the world in condition monitoring best practices, setting new standards for tomorrow and delivering health care for our customers’ most valuable plant assets in ways never before imagined.MT

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The geographic reallocation of global manufacturing is shifting, but the movement is in its early stages. This presents both a challenge and an opportunity for U.S. businesses. The presence of manufacturing in the U.S. has typically been seen as a core driver of the American economy and has influenced innovation, productivity and growth. Similarly, a well-trained workforce has been a keystone to manufacturing productivity. To create a healthy U.S. environment for the onshoring trend to take root, we must re-establish a commitment to technical education, the skilled trades and the individuals who do these jobs.

Historically, communities made sure that the U.S. workforce was well equipped to sustain economic growth by working together—nationally and locally—to build an educational network that included secondary schools, community colleges, universities and technical schools. A well-trained, skilled workforce continues to be integral to achieving world-class standards for quality and efficiency. This caliber of workforce also can be America’s differentiator. As manufacturers examine the total costs of their operations, they will increasingly move away from investing in environments that only offer the cheapest wages. Instead, they will opt for communities that have highly trained workers with the flexibility and skill set to perform a wide array of jobs in different environments.

Yet, finding qualified candidates with strong analytical skills and industrial training remains one of manufacturers’ biggest challenges. For decades, industry leaders have talked about how jobs in the skilled trades are vital to the economic health of our local communities. Now is the time—when there is a growing focus on the value of onshoring—to engage new partners and cultivate new ideas. Now is the time for a renewed energy around championing the value of a well-trained domestic workforce. Working together, we can accomplish more. Through innovative approaches to public-private partnerships, we can ensure a more prosperous business environment that once again fuels productivity, innovation and growth for our local communities.MT

This is attributed to the fact that over the next five years, wage inflation, exchange rate pressure and higher freight rates will erode the majority of cost-advantages in moving production to China and other economies. And besides costs, U.S. manufacturing offers benefits others do not: greater worker safety, efficiency and a more educated workforce. These advantages are becoming especially valued as companies take a more holistic view of overhead costs.

We need to capitalize on re-industrialization. Foreign direct investment in 2012 is up to $26 billion, while at the same time, the low cost of shale gas is spurring strong domestic growth in industries such as petro-chemical, steel and automotive. To keep up with this growth, an available and able workforce is key.

Preparing a strong workforce starts at developing new sources of talent. At Schneider Electric, we focus on university relationships—shaping curriculum, hiring interns, defining career tracks and sponsoring on-campus labs and collegiate competitions (such as the U.S. Department of Energy’s Solar Decathlon) to show what engineering offers.

Additionally, it is important to remember that the new generation of workers wants to contribute to society by conserving natural resources and creating a sustainable planet. In manufacturing, innovations are being developed to solve the energy dilemma, and companies that take this to the next level will attract talent.

We’re also currently fighting the “knowledge gap” between retiring Baby Boomers and young Millennials. By putting into place both mentoring programs and software to capture knowledge, we can retain and transfer crucial industry skills. Moreover, many current workers need continuing-education opportunities to learn about technologies that keep raw material costs (such as energy) low and the cost gap minimal. Vendor-neutral education (such as our Energy University and EcoXpert programs) is critical in giving Americans an advantage.

There are a lot of positive factors driving re-industrialization, but manufacturers need to evaluate their full manufacturing strategy to determine what makes sense—taking into account all of the above factors, while ensuring more flexible manufacturing tactics to adapt to future market trends.MT

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In recent decades, the American economy has transitioned many times—from manufacturing to outsourcing, to economic crisis to a potential resurgence. But this revival is not going to happen through a simple “reshoring” of manufacturing. For the United States, a combination of factors will lead to a robust rebirth in manufacturing.

First, there needs to be significant growth in cutting-edge innovation of new technologies. We are already seeing the revival of startups and entrepreneurship, not only in the traditional havens like Silicon Valley, but also in many new locations across the country. The economic crisis, unemployment and the digital age have been catalysts to a revival of entrepreneurial culture.

Additionally, the gap between product design and manufacturing is fading away and the emergence of the digital factory is imminent. I call this transition in the world of production technology “seamless manufacturing.” America will most likely lead this renaissance—and we need to be prepared. We are beginning to catch glimpses of such a shift in automotive and high-tech industries, which will aid in the birth of a new manufacturing era in the U.S.

Another important factor to consider is the increase in basic labor costs in developing nations. While many industries still thrive on China’s low-cost manufacturing base, for example, medium-sized and niche-technology industries that are looking at long-term, sustainable business models prefer to operate in a more local manner. Collaborative product-development techniques and crowd sourcing—enabled by the Internet—are also playing a major role in the return of manufacturing to the U.S.

Finally, the increase in new manufacturing jobs in the U.S. requires a workforce with different skill sets than those of past eras. Our education system needs to be refocused to produce specialized technologists and business people that are prepared for the manufacturing renaissance. Certificate programs and flexible online courses can help build expertise. The need for well-trained workers will shift toward more advanced skills in high-end automation, material-sciences-based innovation and precision engineering. Global organizations like Siemens are partnering and working closely with universities and technical schools to help design programs and curriculums to suit the needs of this new paradigm. It is more important than ever that we train and develop our labor force.

When combined, all of these factors—education, innovation, increasing offshore labor costs and development of specialized workers —will help boost America’s economy and welcome back manufacturing to the U.S.MT

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Most companies pay close attention to having a competitive cost structure in the manufacture of their products. Generac is no exception. Decisions are constantly being made about whether it is more cost-effective to source components from international suppliers or produce them here in the U.S.

Over the last two decades, the trend for many companies—including Generac—has been to source numerous components internationally because the cost structure of component manufacturers in other countries has been lower than that of similar U.S. manufacturers. In recent years, however, that cost advantage has begun to be mitigated by a number of factors. In the U.S., that includes the use of more advanced manufacturing techniques like automation and lean manufacturing principles that improve productivity and reduce production costs. In other countries, the rising cost of production, as well as the rising cost of shipping components to the United States, have contributed to cost increases for components overall.

The above factors have combined to cause manufacturers like Generac to re-evaluate inter-national sourcing-—in some cases to the point of actually making decisions to “onshore” the manufacturing of certain components back to the U.S. as cost competitiveness has improved. This is a real trend, particularly with components that are physically larger or of a higher-value nature for which shipping and logistics is especially costly, or those that can benefit from automation and lean manufacturing.

Manufacturers need to be cognizant of this trend when making their hiring plans, as it might require that future employees have certain unique skills related to specialized equipment or manufacturing processes. There’s also value for manufacturers to invest in employee training, if they’re not already doing so.

Generac is proud of its robust internal training programs that help our employees continuously improve. I credit these programs—and our employees—with contributing to our ability to efficiently onshore jobs over the past couple of years.MT